All roads lead Alibaba to a Lazada IPO

The Checkout is Tech in Asia’s free newsletter that breaks down the biggest stories and trends in ecommerce. [Read from your browser]( The Checkout 🛒 Welcome to The Checkout! Delivered every Thursday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in ecommerce. If you’re not a subscriber, get access by [registering here](. Written by Thu Huong Le Ecommerce Journalist Hello {NAME} Sometimes the best way to let something grow is to let it go. When Alibaba bought Lazada in 2016, expectations were sky-high. The Chinese ecommerce giant injected about US$4.4 billion into Lazada between 2018 and 2020. At the time, Lazada was poised to dominate Southeast Asia’s ecommerce scene. But things didn’t pan out that way - Shopee’s early days coincided with a period of turmoil at Lazada, marred by culture conflicts between headquarters and local teams, as well as frequent leadership changes. However, recent developments suggest Alibaba is no longer looking to tighten its grip on Lazada. The Chinese group is now working on potentially spinning off its Southeast Asian ecommerce arm through an IPO, Bloomberg reported. For Alibaba, intensifying regulatory pressure at home and weaker consumer spending have spurred the need to expand in overseas markets. The growth runway is still pretty long in Southeast Asia, where online shopping could generate US$234 billion in GMV by 2025. For this week’s Big Story, I write about why all signs point toward an IPO for Lazada. It’s even more timely now that competitor Shopee is stretching thin in new markets and a public listing could give Lazada much-needed ammunition. -- Huong THE BIG STORY  [Why Alibaba should spin off Lazada]( Image credit: Timmy Loen As Alibaba faces challenges in its home court, a Lazada IPO could unlock massive runway growth for its ecommerce ambitions in Southeast Asia. THE HOT TAKE  Behind Shopee’s quick exit from France Here’s what happened: - Shopee bid adieu to France just a couple of months after launching its [localized platform]( in the country. - Shopee told Tech in Asia that its operations in France were a short-term preliminary pilot. - Investors are concerned about the rising costs of Shopee’s expansion into new markets like Latin America and Europe. Here’s our take: Tech in Asia previously [analyzed]( why Latin America makes a lot of sense in Shopee’s global quest. The average ecommerce penetration in Latin America is 6% - similar to that in Southeast Asia. Garena’s Free Fire has been one of the top-grossing mobile games in Brazil, so it can provide players rewards for using Shopee. The French market has always been an outlier, but the Sea Group’s startup DNA means that it has to test the waters. Analysts have noted that Shopee’s performance in France had [underperformed]( from the start. France is among the top 10 countries worldwide in its share of retail ecommerce sales, which came in at 11.2% in 2021, according to eMarketer [estimates](. [An estimated 76%]( of its population are already shopping online. Besides general marketplaces like Amazon and Cdiscount, France has some notable niche ecommerce players or online-to-offline retailers like Vestiaire Collective, Veepee, Auchan, and Sportamore. In Southeast Asia, Shopee’s model has been seen as enabling small merchants to sell online, and most of these sellers focus on sourcing low-price products from China. However, a growing number of consumers in developed European markets are shifting to affordable but high-quality goods from resale platforms. It’s not a coincidence that Paris-headquartered Vestiaire Collective, a luxury resale marketplace has raised more than US$660 million so far, according to [Crunchbase]( data. At the helm of Vestiaire Collective is Max Bittner, who co-founded Lazada in 2012 and served as its CEO until 2018. Bittner also recently [invested]( in Singapore’s Reebelo, a marketplace for pre-owned devices. No doubt, Shopee’s breakneck expansion is costly. Shopee’s investors are getting impatient, and competitors - especially in the ecommerce firm’s core markets - are not sitting still: TikTok Shop [has entered]( Southeast Asia, Grab is [piloting]( a live commerce feature, and Lazada could be refueled if Alibaba can get the right valuation for a potential spin-off. And what about the shift in the consumer mindset? At the moment, Shopee shouldn’t have to worry about Southeast Asia’s consumers pulling back from buying its marketplace’s low-cost offerings and new goods. But that can change down the road as income levels rise alongside a greater awareness for sustainability and the environment. While Shopee decided to back out of France on its own, in India - where Free Fire was recently banned - Shopee may not be in control of its future. – Huong   NEWS YOU SHOULD KNOW Check out Tech in Asia’s coverage of Asia’s ecommerce scene [here](.  1️⃣ Grab has [piloted]( a live shopping feature with Singapore-based BeLive Technology. Grab Live Beta enables merchants to engage with customers in real time.  2️⃣ Ecommerce aggregator Una Brands wants to [invest]( US$100 million in South Korea in the next five years to scale at least 25 ecommerce brands through a partnership with KlickBrands.  3️⃣ India’s quick commerce market is [forecast to hit]( a US$5.5 billion value by 2025, according to RedSeer Consulting.  4️⃣ Singapore-based Zaapi, which enables merchants to create an online store and start selling within minutes, has [raised]( a US$4 million seed round. That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. 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